DraftKings shutters NFT marketplace amid “recent legal developments”

DraftKings has announced the closure of its NFT marketplace with immediate effect, citing “recent legal developments” as the reason.

A statement from the New York-listed operator issued on Tuesday, July 30 confirmed that alongside Reignmakers, an initiative designed to allow users to group NFTs of a specific athlete and enter into fantasy sports contests, the firm’s NFT marketplace has come to an end.

“This decision was not made lightly, and we believe it is the right course of action,” the operator said. “Due to this update, we have decided to offer all holders of Reignmakers digital game pieces the opportunity to relinquish those game pieces to DraftKings in exchange for a cash payment (subject to certain conditions). 

“The payment amount will be based on factors that include, but are not limited to, the relative size and quality of your digital game piece collection.”

DraftKings’ statement went on to outline that although it has shuttered the digital collectibles marketplace, users are still able to access their Reignmakers digital game pieces and other NFTs through the My Portfolio feature.

Additionally, all NFTs that were listed for sale on DraftKings Marketplace are set to be cancelled, while existing offers for listed tokens will also be scrubbed, with funds to be returned to customer accounts.

Users will also be able to transfer a limited number of NFTs they purchased on the marketplace, including tokens from the Autograph Collectibles range and the unopened packs.

The operator stopped short of revealing what legal developments had inspired the decision, but the update comes just days after reports emerged claiming that DraftKings is the subject of a federal class action lawsuit related to the theory that the company’s NFTs are unregistered securities.

DraftKings NFT sales are alleged to have violated securities laws, with various reports suggesting the company could soon face legal action.   

A decision from the Massachusetts District Court denied the firm’s motion to dismiss a class action lawsuit brought against it relating to the NFT marketplace.

The unnamed plaintiff alleges that the platform and its tokens amounted to unregistered securities.

DraftKings first launched its NFT digital marketplace in June 2021 amid the height of the digital asset craze, yet the market eventually cooled as the interest in NFTs waned and a ‘crypto winter’ that saw the value of tokens plummet. According to CryptoSlam, an aggregator of NFT data, NFT sales plunged 63% by 2023.

Back in 2021, DraftKings co-founder and president Matt Kalish talked up the opportunities with the company’s new NFT bazaar.

“DraftKings Marketplace will sit at the center of this technological and cultural phenomenon, providing our immense existing customer base with an easily accessible experience that rivals all legacy marketplaces.

“We aim to usher in this new era by introducing millions of collectors to this evolving space while providing beloved content through an intuitive interface built to win over the long term.”

Soon after, the operator partnered with prominent DJ Steve Aoki to promote its line of NFTs, with the pair working together to create and develop more tokens.

DraftKings was not the only operator to try and expand into the Web3 space at the time, with Entain also launching nine of its own unique NFTs, geared around encouraging responsible gambling.

Sports merchandise giant Fanatics, parent company of Fanatics Betting and Gaming, also followed suit, but at the start of 2023 Fanatics divested its 60% stake in Candy Digital, a company that created tokens for the WWE and multiple NASCAR teams.

More recently, DraftKings chief Kalish told a podcast from Ark Invest last year that “this space that could become, in the next couple of decades, gigantic.”

Yet 12 months on, DraftKings has withdrawn from the space entirely. EGR North America has contacted DraftKings for comment.